Agenda for 30th Class
• Name plates out
• Erie doctrince
• Next Class (Choice of Law)
– See handout (also on www.klerman.com)
– Optional: Glannon Chapter 12
– Questions to think about
• 1) Suppose Wes, a resident of West Dakota, gets into an accident
with East, a resident of East Dakota, on a highway in West Dakota.
Wes sues East in West Dakota state court alleging per se negligence
because East was driving 79 miles per hour. No speed limit was
posted. West Dakota law states that, unless otherwise posted, the
speed limit on a highway is 70 miles per hour. East Dakota law,
however, states that, unless otherwise posted, the speed limit on a
highway is 80 miles per hour. Which state’s law applies to this
dispute? Is your answer different under the traditional lex loci
commissi rule than under the Restatement Second? If you answer is
different, which rule makes more sense?
• See additional questions on next 5 pages
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Questions for Next Class
• 2) Same as (1) except Wes sues in West Dakota federal district court.
• 3) Same as (1) except Wes sues in East Dakota state court.
• 4) Driver and Passenger are both domiciled in West Dakota. Driver drives
passenger to East Dakota. While in East Dakota, Driver talks on his cell
phone and causes an accident in which Passenger is injured. Passenger
sues Driver in West Dakota state court for negligence. According to East
Dakota law, passengers have no right to sue drivers for injuries caused by
negligence. According to West Dakota law, passengers can sue drivers for
negligence. Which state’s law applies to this dispute? Is your answer
different under the traditional lex loci commissi rule than under the
Restatement Second? If you answer is different, which rule makes more
sense?
• 5) Same as (4), except Passenger sues in West Dakota federal court.
• 6) Same as (4) except Passenger sues in East Dakota state court.
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Questions for Next Class
• 7) Spend, a Nevada domiciliary, is completely irresponsible with money.
Fortunately, he recognizes this fact and has set up a spendthrift trust. Under
the terms of the trust, Spend cannot borrow money without the consent of
Trustee, a friend he trusts. Spend goes to California and borrows money
there from Sharkey to be repaid in one year at Sharkey’s place of business
in California. When Spend doesn’t repay the loan, Sharkey sues Spend in
Nevada. Under Nevada law, loans to someone who has set up a spendthrift
trust are void. California law does not allow people to set up spendthrift
trusts, so under California law, such loans are enforceable. The traditional
rule for contracts was the law of the place the contract was formed governs
disputes about contract validity. Under the traditional rule, what state’s law
would apply? Under the Restatement Second, which state’s law should
apply to the dispute? If the traditional rule and Restatement Second suggest
different answers, which makes more sense?
• 8) Same as (7), except Sharkey sues in California state court.
• 9) Same as (8), except Sharkey traveled to Nevada, loaned Spend the
money there, with repayment to be made to Sharkey when he returns to
Nevada a year later.
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Questions for Next Class
• 9) Same as (7), except the loan contract includes the following clause: “This
contract shall be governed by California law.” The traditional rule was not to
enforce choice of law clauses. See also Restatement (Second) below
• § 187. Law Of The State Chosen By The Parties
• (1) The law of the state chosen by the parties to govern their contractual
rights and duties will be applied if the particular issue is one which the
parties could have resolved by an explicit provision in their agreement
directed to that issue.
• (2) The law of the state chosen by the parties to govern their contractual
rights and duties will be applied, even if the particular issue is one which the
parties could not have resolved by an explicit provision in their agreement
directed to that issue, unless either
– (a) the chosen state has no substantial relationship to the parties or the
transaction and there is no other reasonable basis for the parties' choice,
or
– (b) application of the law of the chosen state would be contrary to a
fundamental policy of a state which has a materially greater interest than
the chosen state in the determination of the particular issue and which,
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under the rule of § 188, would be the state of the applicable law in the
absence of an effective choice of law by the parties.
Questions for the Next Class
• Plaintiff in Phillips brought the case in federal district court in Montana. Why
is there a decision of the Supreme Court of Montana?
• In Phillips, the Montana Supreme Court observes that “applying the law of
the place of manufacture would be unfair because it would tend to leave
victims under compensated as states wishing to attract and hold
manufacturing companies would raise the threshold of liability and reduce
compensation…. [A state with a high concentration of manufacturing] could
enjoy all the benefits associated with liability laws which favored
manufacturers in order to attract and retain manufacturing firms and
encourage business within its borders while placing the costs of its
legislative decision, in the form of less tort compensation, on the shoulders
of nonresidents injured by its manufacturers’ products.” (p. 249).
– Suppose Montana has a relatively low concentration of manufacturing.
Would its citizens benefit by laws which raised the threshold of liability
and reduced compensation? Or would its citizens benefit by laws which
lowered the threshold of liability and increased compensation? If it
lowered the threshold of liability and increased compensation, who would
bear the increase in costs? What does this suggest about the fairness of
applying Montana law?
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Questions for the Next Class
• In Phillips, the Montana Supreme Court asserted that “we do not believe
that the purpose of any potentially applicable Michigan product liability law
would be to regulate the design and manufacture of products within its
borders. The purpose of product liability law is to regulate interstate sales or
sales to residents and to set the level of compensation when residents are
injured. ” (p. 249)
– If the plaintiffs in Phillips had filed the case in Michigan state court, do
you think Michigan state judges would have agreed that its laws are
inapplicable? What purpose might a Michigan judge ascribe to product
liability law to show that Michigan law should apply?
• If you were a judge on the Montana Supreme Court, would you have
retained the traditional lex loci commissi rule, or would you have voted (like
the actual Montana Supreme Court) to adopt the Restatement (Second)
most significant relationship approach? Why?
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Last Class – Fee Shifting
• Advantages of British Rule
– Allows plaintiffs to bring meritorious (high probability) cases, even when
litigation costs are high. See Example 11.
– Discourages plaintiffs from bringing frivolous (low probability) suits. See
Examples 15.
• Disadvantages of English Rule
– Public interest litigation to change the law may be deterred, because it
has a low probability of succeeding, even though it is not “frivolous.”
– Risk averse plaintiffs may not bring even meritorious suits. Example 14.
– Because of the way the English Rule magnifies optimism, it may
discourage settlement. See Example 16.
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Last Classes – Subject Matter J
• Like personal jurisdiction and service of process, subject matter jurisdiction
requires statutory authority and constitutional authority
– Statute
• Diversity J: 28 USC 1332
• Fed Q J: 28 USC 1331
– Constitution. Art III, Sec. 2
• Statute can and usually is narrower than constitution
– 1332 Diversity J. Amount in controversy requirement
• Judicial interpretation often is narrower than text of statute
– Fed Q J. -- well pleaded complaint rule
– Diversity J. -- complete diversity rule
• Problem if statute is broader than constitution
– Turkish citizen sues Egyptian citizen who is a permanent resident
domiciled in a US state
– Unconstitutional, so statute needs to be interpreted narrowly to avoid
unconstitutionality
• Construe according to purpose --- to narrow subject matter
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jurisdiction
Exam
• Probably
– 55 minutes multiple choice (approx. 13 questions)
– 80 minutes for 2-4 essays
– 2.5 hours total (15 minutes unallocated)
• Open book
• You can bring a calculator
• Softest (computer) allowed
• Multiple choice challenges
– At your discretion you may (in a Blue Book or in SofTest or however you
are writing Part II of the exam), make a written appeal with respect to any
two of the questions on the multiple choice exam that you feel are
ambiguous or unfair. If you make more than two written appeals, I will
ignore all but the first two. If you make a challenge to a question, be
sure to state in your challenge which answer you marked on the
computer sheet, which other answers you think are plausible and
why.
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Study Tools
• Glannon
• Portal: My Applications (left panel): Recorded Classes
– Recordings to all classes
• www.klerman.com, Civil Procedure button
– Slides for all classes
• My Office hours
– 10 minutes after each classes
– Mondays 4-5
– More after Thanksgiving (to be scheduled)
• Review session
– To be scheduled
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Introduction to Choice of Law I
• Which state’s law applies?
• Relevant in state court
• Relevant in federal court in diversity cases
• Old rules (1st Restatement)
• Different rules for different areas of law
• Torts: Lex loci delictus (law of place of accident)
– If car accident in CA, then CA law applies
– Some ambiguity about situations where defendant’s negligence took
place in different state than harm to plainitff
» E.g. If D negligently manufactured car in MI which caused
accident in CA, would CA or MI law apply?
• Contracts
– Place of formation, if issue was whether contract properly entered
into
– Place of performance, if issue was whether contract breached
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Introduction to Choice of Law II
– Modern rules
• Many different versions
• Restatement Second, “most significant relationship”
– What relationships count in tort?
» Place of injury, Place where conduct causing injury occurred
» Domicile, residence, nationality, place of incorporation, place of
business of plaintiff and defendant
• Not clear which factor dominates in any case
• Similar factors for contract and other areas of law
– Choice of law clauses
• In general, contractual choice of law clauses are followed
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Choice of Law in Federal Court
• Federal court in State X applies X’s choice of law rules. (Klaxon)
• Only relevant in diversity cases
• If federal question, apply federal law
• Choice of law & transfer
• What state’s choice of law rules would apply in a diversity case if federal
court transferred case from CD of California to Middle District of
Pennsylvania?
• Depends on reason for transfer
– Pennsylvania choice of law, if transfer was under 28 USC 1406.
» E.g. if case was improperly brought in CD California.
» Transfer was because plaintiff erred in selecting forum. No
reason to give any effect to plaintiff’s error.
– California choice of law, if transfer was under 28 USC 1404
» E.g. if case properly brought in CD of California.
» Transfer is purely for convenience of defendant and
witnesses, so no reason to change applicable law.
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Erie Doctrine I
• Swift v. Tyson (1841)(Story). Federal courts apply state statutes in diversity
cases, but do not need to follow state court decisions on common law. State
court decisions are only “evidence” of “general principles of commercial
law,” and federal courts are free to develop common law as they see fit
• Erie RR v. Tompkins (1938) (Brandeis)
– RR accident. Issue is whether to apply PA court decisions, defendant
may be liable only for “williful or wanton injury” (not mere negligence)
– Rejects Swift v Tyson. Federal courts apply common law as interpreted
by state courts
• Usually that means as interpreted by state court in state in which
federal court is located, but see next class on choice of law.
– Swift gives out-of-state citizens unfair advantage, because they can
choose either state law (by suing in state court) or federal law (by suing
in federal court)
– Congress does not have the power to make commercial law. Nor do the
federal courts. (probably wrong now)
– Swift makes jurisprudential mistake of assuming that there is a
“transcendental body of law outside of any particular State”
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• Influence of legal realism
Erie Doctrine II
• Guaranty Trust v. York (1945)(Frankfurter)
– Federal court must apply state statute of limitations, which was shorter,
because statutes of limitations are “outcome determinative”
– Law is not “brooding omnipresence of Reason”
– Dont draw (formalistic) line between substance and procedure
– Instead, ensure that “outcome of litigation in the federal court [is]
substantially the same, so far as legal rules determine the outcome of a
litigation, as it would be if tried in State court.”
– State statutes should be disregarded only if they concern “merely the
manner and means by which a right to recover is … enforced.”
• Hanna v. Plumer (1965)
– FRCP 4 applies in federal court rather than narrower state statute
– FRCP are authorized by federal statute, Rules Enabling Act, and apply in
federal court, regardless of contrary state court rule,
• as long as rule is constitutional and governs the “practice and
procedure of the district courts,” and is thus authorized by the statute
– Every rule is potentially “outcome determinative”
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• Modern trend. Apply federal rules and practices in federal court
Erie Questions
• P. 248. Q1b
• P. 253 Q2. Does your answer depend on whether the plaintiff
filed the complaint in federal court 1 minute before the statute of
limitations expired?
• Suppose West Dakota has a summary judgment practice
different from the that which has governed in the federal courts
since Celotex. In West Dakota, a defendant may not prevail by
pointing out that plaintiff lacks evidence on an issue, but rather
the defendant can only prevail on summary judgment by
presenting undisputed evidence on every issue. If a diversity
case is filed in federal district court in West Dakota, what
standard should apply if the defendant files a motion for
summary judgment? Is the answer and/or analysis different
under Guaranty Trust than under Hanna?
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